Buy Nokia and Microsoft, Not RIM or Sprint

Tickers in this article: MSFT NOK RIMM S

NEW YORK (TheStreet) -- When I make a prediction, I often tell people that I reserve the right to be wrong.

Unlike many folks in this business, I do not mind being wrong. As with all of life's endeavors I not only expect to miss frequently, but I welcome the occasion. Rarely, if ever, do I learn a whole lot when people are singing my praises and patting me on the back. In fact, I write better articles after being wrong because it creates a learning experience for all of us. I will never understand why some authors go into hiding after making an errant call.

That said, several instances exist where I disdain missing the mark.

At the top of the list? When I end up wrong because I followed the crowd, but never dug deeper or thought critically past the consensus.

For example, I have never gone with the crowd on Amazon.com . From the moment, Kindle Fire rumors surfaced, the entire world called it a competitive salvo tossed Apple's way. I knew better. And I still do. Developing a deeper understanding of Jeff Bezos' ways has helped make me a better investor.

Emerging stories versus dead money
One of my favorite publications, Slate, published an all-too-common example of blindly following the consensus:

The Lumia 900 smartphone that launched yesterday has the backstory of a summer blockbuster: Two aging veterans of the tech industry, Microsoft and Nokia, team up for one last caper ... Nokia's Lumia 900 is supposed to lead Windows into the mobile promised land and upend the rapidly emerging Apple/Google duopoly.

That's an incredibly thin, short-sighted and uninformed analysis of the situation.

The author followed that up by speaking of logistical blunders surrounding the launch of Nokia's new phone on Easter Sunday. (That sort of thing has never happened to anybody else? Think Apple and China).

He concluded by arguing that "Microsoft can't subsidize hardware manufacturers to make Windows Phone products because Microsoft's whole business is selling operating systems to hardware makers."

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Fair point. Google's Android is open and free.

Surely, Microsoft executives never considered the conundrum the Slate scribe presents.

I have. And it leads me to one of two solutions (or a mix of both):
  • Give the mobile OS away for free.
  • Subsidize smartphone/tablet inclusion of Windows 8 by wheeling and dealing in other areas.

I expect point one to take precedence.

The Slate author should have done some research on Microsoft's history. Critics have claimed for ages that it was up against it and could never succeed. But for better or worse, Microsoft is bigger than the sum of all of our parts.

Think back to the late 1990s. That's when Netscape was going to crush apparently clueless Microsoft. That did not happen because:

People are lazy. If there's a browser already installed on their new computer -- free -- they'll likely use it, rather than go to the trouble of downloading another version. This has nothing to do with the quality of the browser or the "heroism" of Microsoft employees. Microsoft's share of the browser market would inevitably rise as consumers bought new computers and started up the default browser.

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Granted, the author goes on to argue that Microsoft did not necessarily play fair and square. And that's really the entire point. Giants such as Microsoft and Apple often take the liberty of not playing it fair. That's one of the reasons they retain their enormity.

Microsoft has not only thought of how to saturate Windows 8/Metro in the mobile marketplace, but has set itself up to do so. I almost feel comfortable guaranteeing this.

Let's get beyond the obvious to something just slightly less obvious. Obvious: "Can't" is not in Microsoft's vocabulary. If you think it is, you're crazy, uninformed or blinded by Apple love. Slightly less obvious: Microsoft invested in Nokia for a reason. It needs a flagship hardware maker that needs Microsoft even more.

The Microsoft partnership with Nokia is not merely an extension of Bill Gates' charitable work. Hardly. It's a shrewd move that just so happens to provide Nokia a much-needed bailout. This reality leads us to the reason why you should avoid the temptation of perceived "value" or upside in Sprint and Research in Motion .

Simply put, Sprint sold its soul to Apple. I certainly buy the argument that it had no other choice, but that only underscores the unworkable situation this disaster of a company finds itself in. Shockingly, RIM is even worse off.

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Microsoft is executing a strategic coup with Nokia. They're not teaming up for "one last caper." In fact, if you're going to get cute with words, you should refer to the Lumia launch as the pilot. RIM needed a partner. That partner could have been Sprint, but it would have made more sense for the company to pursue the rumor that it would power Amazon's apparently forthcoming smartphone.

Instead, RIM went ahead with plans for BlackBerry 10 or whatever they're calling it. The second the company's new CEO (with a name you never heard of and really do not need to know) unveiled the new phones, RIMM stock took off to new lows.

Expect this lack of vision to push RIM into the single digits alongside Sprint. Because companies such as Microsoft think of everything and then some, watch Microsoft flirt with $40 sooner rather than later. While I am not pouring my life savings into Nokia, it's a nice speculative derivative play on the moves Microsoft has yet to make.

Tickers in this article: MSFT NOK RIMM S